I’m president and CEO of IMA (Institute of Management Accountants), one of the largest and most respected global associations focused exclusively on advancing the management accounting profession. Prior to joining IMA, I was the CFO for business sales at AT&T, an $18B revenue operation. In this column I’ll draw on my experience to offer CFOs – and their teams – insights and ideas related to challenges of the position, in light of market demands and global economic conditions. During my tenure at IMA, I’ve spoken on accounting regulatory issues, providing testimony to U.S. Congress on internal controls and risk management as it relates to Sarbanes-Oxley implementation, appearing before the SEC and PCAOB on critical regulatory matters impacting U.S. global competitiveness, and I served as a member of the COSO (Committee of Sponsoring Organizations) board of directors, which delivers global guidance on internal controls and enterprise risk management. I’ve authored numerous trade articles on accounting issues and recently contributed a chapter on ethical leadership to “Trust Inc.: Strategies for Building Your Company's Most Valuable Asset,” entitled Trust: The Uncommon Denominator in an Uncommon Business World.

Q-and-A: Former Special Olympics CFO on the Role of Trust in Nonprofits

I recently spoke with Andre Alexander, CMA, who is the former chief financial officer of the International Special Olympics and a member of the IMA Global Board of Directors. He was also recently named the CFO of nonprofit Food Allergy Research and Education (FARE). In the first of a two-part series, we spoke about the importance of brand management in a nonprofit organization compared to a for-profit. View the full video interview below, and watch out for part two, when Andre will discuss how he deals with talent gaps on an international level.

This interview has been edited and condensed.

Jeff Thomson: Andre, what do you think are the essential differences between working for a not-for-profit, which of course has a societal purpose, and a for-profit enterprise?

Andre Alexander: At the end of the day, I leave feeling very different than I would working for a for-profit organization. I really feel that Special OlympicsInternational and FARE are making a difference in the world. Aside from the personal value and rewarding experiences, I would say that nonprofits are unique in that they’re incredibly complicated. We’re always lacking sufficient resources, whereas for-profit enterprises that are not making any money divest themselves of a particular venture and move on.

In terms of similarities, accounting is accounting. We have to close the books, get through the regulatory compliance and get through the audit. And in a global nonprofit organization, there are also similarities; you’re dealing with all the international issues, like managing an international workforce and offices, so there are a lot of parallels in that regard.

JT: How would you describe other key challenges not-for-profit CFOs face, in addition to resource allocation?

AA: Brand management is extremely important in a nonprofit. If you tarnish your brand, people don’t trust you. The nonprofit model is one of trust because there’s no direct feedback from the people giving you money and those receiving the benefits. Typically, you’re receiving money from a donor who trusts that you will spend the money in the manner in which you say. There is no way for them to measure how well you are actually achieving those goals or helping the communities that you serve.

That’s very different in a for-profit environment, where you can see the shareholder’s market values, the company’s market values, or the net income that’s returning value to the shareholder, and if you’re not getting the desired return, you can get rid of that particular stock and buy something else.

Similarly, in a consumer-oriented company, if their product is not something you like, you would choose a different product, and they would get direct feedback because their sales would fall. In a nonprofit environment, you don’t have that feedback mechanism, so it’s a little more challenging to ensure that the donors continue to trust you. So brand management, compliance with all regulations, and transparency around your financial statements are absolutely key.

JT: What do you see as the biggest challenge and the biggest opportunity of the financial disclosure process as it relates to nonprofits – and in particular, to Special Olympics International?

AA: To be honest, the only people who ask for the audited financial statements are their banks. Most donors want to see our form 990 because it has more relevant disclosures. If we actually gave our financial statements to donors, they probably wouldn’t know how to interpret them.

Nonprofit accounting, as it’s currently being reported under Statement of Financial Positions 117, is complicated for most people to interpret. They don’t understand the funds that we have to use – the unrestricted fund versus temporarily restricted fund versus the permanently restricted fund. I find myself having to educate even our own board members. Every time I go over the financial statements, I have to reiterate and reinterpret how the information is presented.

Disclosures are also very complicated; they’re not written in plain English. If we were to provide financial information to donors, most donors would be baffled and would not understand how to read our basic financial statements, let alone the notes. So, I applaud the Financial Accounting Standards Board’s effort to come up with a simplified solution and to lessen the number of disclosures in financial statements.

This column offers CFOs and their teams insights and ideas related to challenges of the position, in light of market demands and global economic conditions. Jeffrey C. Thomson, CMA, is president and CEO of IMA (Institute of Management Accountants), one of the largest and most respected associations focused exclusively on advancing the management accounting profession. Follow IMA on Twitter and visit IMA’s YouTube channel.

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